29th July 2017
While goods and service tax regime is expected to boost the growth of the Indian economy the e-commerce sector is being adversely impacted by this new regime. India’s e-commerce sector is all set to become the world second largest market in the time of less than two decades. It is also one of the most rapidly growing markets in India. The revenue of this market is expected to reach Rs.100 billion by 2020. The nation is moving quickly moving towards digitization thus e-commerce sector is also growing rapidly.
Goods and service tax is the biggest taxation reforms in the history of Indian taxation system. This new regime has drastically increased the number of compliances for e-commerce sector. The small e-commerce vendors are facing a lot of problem in adjusting with this new regime. Goods and service tax regime have following impacts on small e-commerce vendors-
1.No threshold limit for GST registration: Under the GST regime any business entity is required to obtain GST registration only when it’s aggregate turnover exceeds 10 lakhs in north eastern states and hill station while 20 lakhs in other places. However, no such limit is applicable in the case of e-commerce sellers. All the businesses carrying out e-commerce activity are required to get registered under GST irrespective of their turnover. Due to this, all the small e-commerce vendors came under the scope of taxation who had the benefit of being exempted under the earlier regime.
2. No Benefit of Composition Scheme: The government has introduced the composition scheme in order to reduce the burden of compliance for small and medium businesses. Under this scheme, businesses are required to file returns quarterly instead of monthly returns and pay taxes at nominal rates up to 2%. Most of the sellers on e-commerce platform are small or medium scale vendors. These e-commerce vendors are excluded from this scheme thus, they are not able to avail the benefit of this scheme.
3. Mechanism of tax collection at source: With the implementation of GST regime a new concept of tax collection at source has been introduced. As per the mechanism of tax collection at source the e-commerce operators are mandatorily required to deduct a percentage amount from the e-commerce seller as the GST liability of seller and deposit it with the government. The e-commerce sellers are required to file monthly return under GST to claim the credit of TCS collected by the marketplace operator. This will impact the working capital and cash flow of these sellers.
4. Filing of special return GSTR-8 - Every e-commerce operator is required to file a special return called the GSTR-8. While filing the returns they are required to show an amount of TDS deducted from each supplier by uploading the respective invoices. The amount filed by him should match the data with the monthly GST returns submitted by the e-commerce suppliers. This creates a huge amount of paperwork, making it difficult for both the e-commerce operator and the supplier to comply with the tax department. Failing to comply can lead to a penalty of Rs. 25,000, which is a significant burden for a small supplier.
5. Input Tax Credit- One of the benefits of GST to small e-commerce vendors is the availability of input tax credit. Every e-commerce vendor can claim the input tax credit against the tax deducted by the marketplace operator. The credit can be claimed through the electronic cash ledger of the suppliers’ GST portal only when the vendor files the return and make full payment of tax.
Thus, GST has provided the benefit of input tax credit to small e-commerce vendors. However, it has drastically increased the number of compliances for them.
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